Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/214986 
Year of Publication: 
2019
Series/Report no.: 
CESifo Working Paper No. 7984
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
This study examines the impact of investors' buy and sell trades on Korean stock market volatility across two crisis events, the Asian crisis of 1997 and the 2008 global financial crash. We investigate the trading behaviour of domestic vs. foreign and institutional vs. individual investors. Our results suggest that the buy and sell trades have an asymmetric effect on volatility that depends on the type of investor trading and on the phase of the business cycle. Buy orders appear to be more informative than sell orders since they mostly lower volatility in the pre-crisis periods, while sell and post-crisis buy trades affect volatility positively regardless of who trades (institutional or individual investors) and on what information (member, non-member). Most importantly, decomposing total buy and sell trades into trader-type categories reveals that some institutional investors are more informed traders that stabilize the market compared to individuals that always increase volatility. Foreign investors reduce volatility with their purchases and total trading activity in the whole Asian crisis sample, but only in the pre-crisis period before the recent global financial turmoil.
Subjects: 
financial crisis
foreign investors
individual investors
institutional investors
long memory
range-based volatility
structural change
trading volume
JEL: 
G01
G12
G15
G23
Document Type: 
Working Paper
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